This is the second installment of our two part "Gold Stocks to Buy" series. As we stated in Part 1, we think gold and gold stocks will be bullishly impacted by the nascent trend of sovereign nations and their central banks acquiring gold bullion. We feel that trend represents a generational change in the mindset of central bankers and will ripple through the gold market for years to come with a positive impact on prices. Finally, we think we are at the point in time when gold (and gold stocks) will once again start to benefit from all the normal factors that traditionally drive the price of gold.
Here are the final five of the ten gold explorers/producers all with market caps under $2 billion that we have selected:
MineFinders Corp. Ltd. (MFN)
MineFinders is a $1.2 billion market cap company with an average trading volume of 780,000 shares. The company is headquartered in Vancouver and operates in Mexico. The company’s Dolores Mine in northern Mexico is an open pit heap leach operation with reserves of 2 million ounces of gold and 114 million ounces of silver. Production this year should be 65,000 – 70,000 ounces of gold and 3.3 – 3.5 million ounces of silver. Mine life is estimated at 16 years. None of their production is hedged. Their La Bolsa project is nearing a construction decision and could result in company production increasing 80 – 90% by 2015. Current cash at midyear is a very healthy $221 million making MineFinders fully funded. The stock is off 17% from its 52 week high.
Minera Andes, Inc. (OTC:MNEAF)
Minera Andes is a $573 million market cap company with an average daily trading volume of 166,000 shares. The company operates principally in Argentina where it holds a 49% interest in the operating San Jose Mine. Last year the San Jose produced 84,000 ounces of gold and 5.3 million ounces of silver. Significant upside is provided by their 100% ownership of the Los Azules copper deposit. The CEO is the largest shareholder with =/- 31% and has proposed a merger with U.S. Gold where he is also the largest shareholder with 20%. It appears that the company will be impacted by the recent Argentinean decree requiring the mining industry to repatriate revenues from exports. The stock is off 42% from its 52 week high.
Paramount Gold & Silver Corp. (PZG)
Paramount is a $388 million market cap company with an average daily trading volume of 1.4 million shares. The company has the 100% owned San Miguel project in Mexico (situated adjacent to Coeur d’Alene’s producing Palmarejo mine) and the 100% owned past producer Sleeper Gold property in Nevada. Sleeper has a M&I gold resource of 2.6 million ounces of gold (with another 1.1 million gold ounces inferred). Many of the old permits are still in place and the tailings which are thought to contain 700,000 ounces of gold should be an early source of funds. The San Miguel Project virtually surrounds Coeur d’Alene’s Palmarejo mine – to date PZQ has a M&I resource of 88,000 ounces of gold and 9.7 million ounces of silver (1,023,000 Au and 74,647 Ag inferred). Management has built and sold companies before and it is commonly believed that after adding additional value the company will be sold all to the benefit of existing shareholders. The stock is off 35% from its 52 week high.
U.S. Gold Corporation (UXG)
U.S. Gold is a $ 674 million market cap company with an average daily trading volume of 2.8 million shares. The company is based in Toronto but operates in the United States and Mexico. The Gold Bar project in Nevada was previously mined by Atlas Gold and could be in production by 2014. Phase 1 of the El Gallo Project should commence in mid 2012, initially it will produce 30,000 ounces of gold per year from satellite gold deposits which will help fund Phase 2 where annual silver production is forecast to be 5 million ounces per year. The CEO is merging U.S. Gold with Minera Andes with the goal of creating the critical mass to take the company to the next level. The stock is off 51% from its 52 week high.
Vista Gold Corp. (VGZ)
Vista is a $ 271 million market cap company with an average daily trading volume of 1.0 million shares. The company is based in the U.S. but has interests in Australia, Mexico, Indonesia as well as the United States. Total M&I resources are 11.6 million ounces of gold. Feasibility studies are completed for the Concordia gold project in Mexico and permitting is in progress. The Mt. Todd project in Northern Territory, Australia has a completed prefeasibility study in place and is advancing their bankable feasibility study. This project is projected to produce 240,000 ounces of gold per year. Additionally, Vista owns 30% of the stock of Midas Gold Corp (value $125 million). The stock is off 16% from its 52 week high.
In conclusion, we feel now is an opportune time to accumulate gold stocks and benefit from a resurgent interest in the gold market.